There are a lot of McMansions around Austin, TX and I was wondering what it costs developers to build one in terms of labor and materials. I was also wondering what the price difference would be on a comparable home built with greater energy efficiency, not counting any subsidies.
Thanks for your help,
Rob
The rough answer to your question is that there are far too many factors and market forces at play to cite a typical margin of profit on new construction; ergo it’s too complicated to deduce from the margin of profit what the costs of construction were.
Considering the various affiliations a builder will have with subs, it becomes nearly impossible to quantify the total profit without complete access to the books.
When lots of subs are slow, the cost of construction is lower, but if the subs are busy and quoting high prices, the the cost goes up. The builder might opt to build spec homes at a short term loss to be a segment leader in the market.
For example, it might costs 300k to build a new home that will sell for 365k, but it also might cost 280k to build the same house that will sell for 280k someplace else. The builder might opt to do this as part of a long-term strategy to keep his company visible and ready for the turn around.
The builder may, or may not, have to borrow to build. Borrowing raises the costs of construction, too. Marketing a propert costs money, but often the avoidance of marketing costs is a reason for spec homes: Spec homes let you be the builder and let the product self market itself to some degree.
I wasn’t really interested in the builder’s margins, but rather to compare the price difference between the standard construction and a more energy efficient home with comparable features.
Thanks for your help,
Rob
What’s to stop an energy efficient house from being a spec home? You know that that means “speculation,” right? Not “specification” as in some strange idea of “standard specs.”
Nothing, but generally when I see a spec home, it seems to be of the cheapest construction that the law will allow and the market will bear. I don’t see too many builders making straw bale houses using geothermal cooling and not bulldozing all the trees on a site.
BTW, when I say spec home, I mean a home that the builder has built without having an actual buyer lined up. If it has a different technical meaning, I apologize for the confusion.
Thanks for your help,
Rob
Consider that “standard construction” today is a LOT more energy-efficient than a typical spec house from 10 or 20 years ago. Thick insulation, gas-filled double-pane or triple-pane glass, Energy Star-rated appliances, high efficiency HVAC, low flow toilets, and so on are the norm. If you’re looking for a hippy-dippy LEED Unobtanium-rated greener-than-green house made from FSC-certified lumber, free-range organic straw bale, fair-trade adobe bricks, Kosher-certified VOC-free milk paint and the like, not many are being built as spec homes.
“Energy efficient” means different things in different parts of the country.
Spec homes can range from cheap construction to high-end construction with all the bells and whistles. It could also mean an energy efficient home. It all depends on the intended market.
Exactly, not having a buyer lined up is why the “spec” in spec home means that the builder has built the house on the speculation that he will find a buyer.
I’m not a builder, but if I were to throw up an entire house, I imagine it would cost me quite a bit. Like my esophagus, at the very least.
My house which was built in 2001 is insulated (probably to R-13) and has low flow toilets, but I don’t have double pane windows and I don’t believe I have a high efficiency HVAC unit (my house has two actually) and I am also not sure about my water heater (although it is located in the nice, hot attic where I think it belongs). As you said, different regions have different standards. I wasn’t really looking for, say, solar panels thrown in by the builder, but the above features might be nice. Ideally, I’d like to get a house that doesn’t really need an AC or at least doesn’t need to run it much. Also, efficient use of water wouldn’t be terrible. If builders wanted to offer that stuff, what would it cost them over and above what they pay for construction now? Also, when I see high-end construction, I see things like granite counter tops and stainless steel appliances. IOW, money is spent on things the buyer can see versus the things the buyer can’t. I wouldn’t expect you to get more than what builders regard as SOP unless you were buying a custom-built home.
Thanks for your help,
Rob
The selling price of a spec home is a known. If the margin is a known, then you can deduce the cost of building said spec home. Using this method, you have some sort of starting point. "what’s it cost’ is so open-ended and subject to so many variables to be impossible to answer.
However, If I said that profit margins on new homes are typically 15%, then that means that a spec home that typically sells for $300,000 might cost the builder 255,000 to construct.
“Spec Home” to me means a house that has various features chosen at the discretion of the builder that is built without an order from a customer, but which is not going to be a 'Sample Home" per se (won’tll be knocked out to the nines and furnished/decorated, etc). A spec home should get some attention while being built, and during construction it might offer a potential buyer a chance to make an offer and leave time to pic out some finishing colors/materials, or it could just go all the way to completion.
I’m building a spec house right now, and I put in insulation with R-values in the 30s, double-paned windows, hot water on demand, etc. If you’re able to place an EarthCraft rating on a house in the Atlanta area, it is just as valuable a selling point as Viking appliances & stone counters.
Assuming that spec = cheap is probably a bad idea, though it often is the case. There are as many flavors of spec houses as there are of ice cream. Some builders want to develop a reputation for building high quality houses. Some really don’t have a choice but to do so, especially if they are building in a high-dollar area. Some know that price is the primary issue for some folks.
In other words, there is no SOP.
Called dad, the custom home builder/general contractor.
Like the other dopers said, it depends. Right now, new construction is running some lower margins to keep it attractive compared to the tons of good houses on the market that are ready to go. OTOH if you start inquiring with a set of plans you had done, they know you want it your way vs. whats on the market and are willing to pay a premium price for your way.
so IF anyone needs a house built on the central coast of CA, I know a guy 